Good Q3 at Swedbank as Higher Rates Lift Deposit Margins

Narrow-moat Swedbank reported third-quarter profits before tax of SEK 7,180 million, up 23% the SEK 5,854 million the bank posted a quarter ago. The strong performance was the result of total income growing 21% to SEK 14,030 million while operating expenses were kept in check at SEK 5,329 million, up 2% only. The cost/income ratio came in at a strong 38% in the quarter, while credit impairments were significantly higher at 13 basis points or SEK 602 million compared with previous quarters. That said, the majority of these loan-loss charges were the result of harsher forward-looking macroeconomic scenarios used in the bank's risk models rather than a deterioration of observed credit quality. We maintain our SEK 207 per share fair value estimate.